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NEW DELHI: The
expenditure department has decided to sanction Rs 1,300 crore to the proposed
Post Bank of India to meet its capital requirements even as the department of
financial services (DFS) - the wing in the finance ministry that deals with
state-run banks and their policies - chose to stay away from the issue.
The proposal's backing by the expenditure
finance commission and its subsequent green light by finance minister
P Chidambaram is seen as the official go-ahead by the finance
ministry, ignoring the DFS's stance. The DFS position is seen as the first
instance of the agency not backing the Post Bank's plan, which officers in the
department have privately mocked at
"They think they can use the postal
deposit model for their banking foray. Nothing in their plan seems to be clear.
Banking isn't easy," said an officer, who did not wish to be identified.
In fact, a strong Post Bank is seen to be the biggest challenge to existing
public sector banks, including State Bank of India, which controls 70% of the
banking business in the country. SBI, the largest lender, has a little less
than 15,000 branches, while there are over 1.5 lakh post offices across the
country.

Although Post Bank does not intend to open a
bank branch in each post office, the plan is to use postmen to meet the
financial inclusion goal. Secretary (posts) P Gopinath refused to speak to TOI
despite several attempts.

According to the plan, Post Bank will have 50 branches in the first year, which
will be increased to 150 by the fifth year. The branches will be located in
select Head Post Offices in Tier-1-4 centres and select Sub-Post Offices in
Tier-5-6 centres.

To meet RBI norms, the postal department
proposes to set up a new entity - Post Bank of India - that will have an
independent board and separate operations. Apart from independent directors,
the board will have representatives from the finance ministry and the postal
department. Separate recruitment has been planned to have specialist bankers.

While converting the entire postal network would
have meant a capital requirement of over Rs 60,000 crore, by setting up a
special entity, the fund requirement has been reduced. This, officers said,
will also help create a more focused strategy.